The Relationship between Portuguese Economy Indicators and Housing Prices

Abstract

The housing market is an important industry not only in a country’s economy but also for the living conditions of the population. Several studies explain how real estate is related to the main economic indicators of a country. Using the Engle-Granger cointegration methodology, this research studies the main drivers of the housing prices of a European country that suffered a financial crisis. Analysing the Portuguese housing market with quarterly data between 1998 and 2019, it is possible to show that in the long term, unemployment and interest rates are negatively related and that population, inflation and money supply are positively associated with housing prices. With this study, it is possible to conclude that economic issues are relevant to the housing market and mainly to home prices.

Keywords

• housing prices
• long-term effects
• cointegration
• economic factors